Use suppliers to reduce risk

23 November 2009

23 November 2009 | Allie Anderson

Purchasing managers should work with suppliers to better identify and mitigate risks.

In a new article on procurement trends, consultancy Efficio says buyers should encourage vendors to mitigate risks themselves by including a risk management element in the sourcing process.

It says managers could give themselves a basis for shortlisting suppliers in a tendering exercise by incorporating a risk management section in requests for proposals (RFP), asking vendors how they would stop risks occurring and how they would reduce the impact if they did happen.

The Efficio-produced report, "Risk management - using your supplier to mitigate risk", says: "By having a clear objective of what should be achieved and giving it an appropriate weighting in the selection criteria, it is easy to then turn this into one of the key areas of negotiation and selection.

"Roles and responsibilities can be agreed and penalties introduced if the risk is not managed accordingly."

Most suppliers would welcome working more closely with buyers and involvement in developing a risk management programme, the report adds.

For suppliers, inclusion in managing risks pre-empts costs and concerns from spiralling if unexpected problems occur.

The article concludes: "Procurement is in a prime position to work across the business, building security into operations and contracts and ensuring as much continuity as possible.

In the current climate, managing risks should not be an afterthought and suppliers should be included from the start." See also:

Blog, November 16 'Why buyers should play Cassandra'

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